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Most individuals keeping up with technology-related legal issues have heard of the Napster/Aimster/Grokster trilogy of cases and have probably seen plenty of media reports about the recent arguments in the Grokster case before the U.S. Supreme Court. Those cases involve music and video file-sharing technology known as peer-to-peer — “P2P” in Internet lingo — networks. Essentially, these are connections made directly from one computer hard drive to another using Internet technology. The networks allow one user to copy files from another user’s computer. The newfangled P2P networks involved in the Grokster case do not involve a central computer server with any one person or entity having control over a master index of the files. What is at stake in these cases is much more than whether or not Johnny can download the latest 3 Doors Down album for free or whether Streamcast or other distributors of the software that enable such copyright infringement can be held liable for Johnny’s actions. The issue is nothing less than the delicate balance between protecting the content industry — the music, video and other entertainment and information publishers — and protecting the right of innovators to create new technology and advance the progress of the arts and sciences without fear of expensive litigation. These two competing interests need each other. The Internet and computers would not be the valuable media and tools that they are today without the software and other content that add practical value to most users. Content producers would not enjoy the market access they have today but for computers, the Internet and other technologies. One need only think of videocassette recorders and digital video discs. In fact, the key case addressing this balance was a case involving one of the first versions of VCRs. ‘SUBSTANTIAL NONINFRINGING USE’ Back in the mid-1980s — equivalent to the Dark Ages in Internet time — the U.S. Supreme Court announced a new rule to delicately balance these two competing interests. In Sony Corporation of America v. Universal City Studios Inc., the high court held that the mere fact that a technology product could be, and in fact was being, used to infringe the copyrights of others did not render the manufacturer of such product liable for such third-party infringement, where the product was “capable of substantial noninfringing use.” This decision involved Sony’s Betamax videocassette player, which is why the case is generally referred to as just the Betamax case. Today, Sony owns interests in several content producers that are part of the group challenging the Grokster decision and seeking to hold the technology providers liable for the infringement acts of others. In any case, even in 1984 when the Supreme Court decided the Betamax case, the justices were uncomfortable trying to adapt existing concepts of law to emerging technology. In a prophetic statement, the court wrote: “Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials.” Despite such protestations, however, the court felt compelled to adapt principles from patent law governing secondary “contributory” liability for infringement to the copyright environment and to protect innovation by limiting the ability of copyright owners to exercise a virtual monopoly over the market for products that affect their copyrights. Similarly, the current Supreme Court has been thrust into the modern version of that case. It’s the clash between, on the one side, the music and movie industries that produce the copyrighted content that is being downloaded illegally, and, on the other, the software and technology industry which include those who make available the P2P file-sharing technology used to illegally download the copyrighted materials. Perhaps the lineup of the briefs filed by nonparties as friends of the court is the most telling indicator of the epic proportions of this clash. More than 50 such briefs have been filed with the court — 26 supporting the respondents (Grokster and Streamcast), 19 supporting the music and movie industry petitioners, and nine neutral as to result. The entities represented on both sides are a veritable who’s who of their respective industries. REWARD FOR INNOVATION So what is really at stake? Is this case that important? A huge amount, and yes. Our Founding Fathers envisioned a balance between encouraging innovation and protecting with limited monopolies patented and copyrighted creations. In fact, this was such an important component of our new nation that the founders included a clause addressing this issue right in the very first article of our Constitution. Section 8 of Article I provides that Congress shall have the power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Note that the focus is “to promote the progress of science and useful arts.” Note also that the “exclusive right” is to be secured only for “limited times.” The idea is clearly to create the incentive for innovation by allowing a limited monopoly as a reward for such innovation, but the desired result is always to promote innovation. In the Grokster case, the technology industry argues that to hold the innovators of software and other technological “products” liable for the use made of such product by others over whom the innovators do not exercise control would be to stifle innovation by the chilling effect such liability would have in the technology marketplace. Computers can be used to infringe just as VCRs and copy machines can. Software and Internet technology can be used for legitimate purposes, though clearly these can be abused. But to hold the manufacturer of computers or networking software liable for such misuses would discourage inventors from developing products that, while capable of noninfringing uses, might in fact be used for improper infringing uses. The content industries counter that in this day and age of near-perfect digital reproductions and instant, low-cost, worldwide distribution via the Internet, to allow infringement-facilitating technology to be sold or distributed would similarly stifle the incentive for content producers to create such content. In the analog days of the Betamax and of cassette tapes, a self-regulating factor was that with each copy there was degradation in the quality of the copy. That’s not the case with digital copying. The movie and music industries advocate a test whereby there must be more than a mere capacity for substantial noninfringing use in order to outweigh the damage done by the actual infringing uses. Others advocate a hybrid approach that would focus on whether there is any actual inducement to infringement by the defendant manufacturers and distributors, or would apply a sliding scale, balancing approach. NEW TEST FOR INTERNET AGE? “Tough facts make bad law” is a cliche in the legal profession. These clearly are tough facts. Congress, in turn, has failed to act and the hot potato is now in the hands of the nine senior lawyers who constitute the Supreme Court of the United States, nine justices who would surely prefer to defer to Congress as they pleaded back in the Betamax case. Will the high court re-affirm the Betamax precedent or will it seek to forge a new test to apply to the new reality of the Internet age? Will the court apply the interpretation of the Betamax case adopted by the 7th U.S. Circuit Court of Appeals, which held the manufacturers liable in the Aimster case? Or will it apply the interpretation by the 9th Circuit, which absolved the manufacturers in Grokster? The case was argued on March 29. The technology and content industries anxiously await the decision. Lawyers who practice in these areas of law also should stay tuned. Jose I. Rojas is a founding partner of Rojas Santos Stokes & Garcia in Coral Gables, Fla., where he concentrates his practice on complex business, technology, intellectual property, computer and Internet-related matters.

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